Investors encouraged to buy ETFs tracking U.S. dollar movement

2017/03/18 17:16:59
Investors encouraged to buy ETFs tracking U.S. dollar movement

Taipei, March 18 (CNA) With the U.S. dollar the favored foreign currency traded by local investors, they have been encouraged to buy into exchange traded funds (ETFs) that track the movement of the U.S. currency.

According to the Taiwan Stock Exchange (TWSE), the main board has provided three ETFs tracking the U.S. dollar, which have become new options for local investors who are keen to list the greenback in their portfolios.

Since March 14, the Yuanta S&P U.S. Dollar ER (excess return) Futures ETF, the Yuanta S&P U.S. Dollar 2x Leverage ER Futures ETF and the Yuanta S&P U.S. Dollar 1x Inverse ER Futures ETF, issued by Yuanta Securities Investment Trust Co. (元大投信), have been listed on the main board.

The Yuanta S&P U.S. Dollar ER Futures ETF tracks the S&P U.S. Dollar Futures Index ER, and the Yuanta S&P U.S. Dollar 2x Leverage ER Futures ETF follows the S&P U.S. Dollar Futures 2x Leverage Daily Index ER, while the Yuanta S&P U.S. Dollar 1x Inverse ER Futures ETF tracks the S&P U.S. Dollar Futures 1x Inverse Daily Index ER.

The TWSE, which operates the local main board, said that the Yuanta S&P U.S. Dollar 2x Leverage ER Futures ETF is expected to allow investors to rake in double returns at a time when the U.S. dollar is moving higher.

In a down market, the TWSE said, the Yuanta S&P U.S. Dollar 1x Inverse ER Futures ETF is expected to help investors hedge their risks. However, the TWSE added that the leveraged and inverse U.S. dollar futures ETFs should only be used as a short term investment tool rather than a long term investment.

Huang Yi-hsuan (黃議玄), a manager of the Yuanta S&P U.S. Dollar 2x Leverage ER Futures ETF, said that the ETFs tracking foreign currencies are expected to help investors broaden their investment portfolios.

In particular, Huang said, the three ETFs tracking the U.S. dollar movement issued by Yuanta are among the top choices for local investors who favor foreign currency trading.

Huang said that the U.S. dollar is the most-traded currency in the world market, and the greenback is also highly correlated to the fluctuations of raw material prices, which shows the importance of the currency in investment portfolios. The U.S. dollar index, which tracks the greenback's fluctuations against six other currencies -- the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish Krona, and the Swiss franc -- has become the most closely watched indicator of the greenback's strength, Huang said.

In addition to the Taiwan dollar exchange rate against the U.S. dollar, Huang said that local investors should also pay close attention to the U.S. dollar index when they map out their strategies for investments in ETFs tracking the greenback.

(By Tien Yu-pin and Frances Huang)
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